NAIROBI, Kenya, Sep 6 – Lack of finance has been attributed as the main cause limiting investors’ participation in agri-business, according to a new report released Tuesday by the Alliance for a Green Revolution in Africa (AGRA).
The report released during the ongoing Africa Green Revolution Forum in Nairobi indicates that the gap is for entrepreneurs that need funding between $1.25 million (Sh125 million) dollars and $1.50 million dollars (Sh150 million) to take their agribusiness to the next level of growth.
Africa Enterprise Challenge Fund Chairman Paul Boateng says this provides an opportunity for banks and venture capitalists to come up with funding opportunities that will take agribusinesses to the next level.
He says the lack of financing has seen many agribusinesses stagnate making it difficult for Africa to realise its true agribusiness potential.
“We need banks, foundations, venture capitalists to do more, but for that to happen we need political will as well as investor will, we also need partnerships with innovative farmers, enterprise farmers, Small and Medium sized enterprise and large scale multinationals underpinned by a commitment towards agriculture in Africa,” he stated.
He says even as Africa needs to focus on delivery rather than commitments urging African countries to deliver the Maputo Declaration 2003 commitments to invest 10 percent of national budgets to agricultural development.
Only eight countries have delivered their promise.
“It’s neither a shortage of ideas, nor a shortage of investments, it’s a shortage of finance, where financial institutions lack capacity to invest and come up with funding mechanisms and unwillingness to fund these agri-entrepreneurs.
While the report notes promising development of products like crop insurance tied to weather indexes, farm loan programs that share the risk among many participants, and innovative uses of mobile banking services and microfinance, only about 6 percent of rural households in sub-Saharan Africa are borrowing from formal financial institutions.
Also, investments allocated to agricultural research and extension services has fallen precisely when they are needed most the report states.
“At a time when climate change is producing intense demand for crop varieties and other innovations that can help farmers adapt, investments are not keeping up. For example, expenditures in Zambia, Malawi, and Tanzania in 2014 represented only 1.4 percent or less than overall budget allocations agriculture,” the report underlines.
Former AGRA President Namanga Ngongi, who chairs the Board of Trustees for the African Fertilizer and Agribusiness Partnership, said the report should set the stage for a productive meeting when political leaders and agriculture experts converge on Nairobi later this week.
“My hope is that this incisive analysis of the current state of African agriculture will stimulate a more profound and impassioned debate about the kinds of investments and initiatives now required to make transformation of this sector,” he observed.
Realizing the promise of African agriculture will not be cheap.
It could require US $315 billion (Sh31.8 trillion) to US$ 400 billion (Sh40 trillion) over the next ten years in public and private sector investments in all aspects of food production, processing, marketing and transport.